How Not to Be Sucked into the Blockchain Rabbit Hole
‘The Basics of Bitcoins and Blockchains’ by Antony Lewis is insightful, extremely readable and a fantastic crash course in money.
The Time Machine
Imagine a time machine takes you back in the early ’90s California and luckily you are invited to two presentations for a something called ‘The Internet’.
In the first one the keynote speaker in his grunge-era clothing is more than excited to describe how the Internet protocol uses ‘packets’ to transmit data and ‘The difference between TCP/IP and UDP’. Suddenly after the presentation you start worrying if a packet is ‘lost’ on the network or how many hops there are between you and a server in New Zealand. You, just like your package of data on the Internet, are completely lost in the sea of terminology. This is not going to work, you feel dull. Period.
During the second one the presenter looks like a Wall Street yuppie. He barely understands the Internet technology and he uses gushing adjectives and adverbs to describe it. He is a marketing guru who wants to over-sell ‘The Internet’ for a price. The purpose of the sales pitch is you and your naïve investment in an unproven technology neither you, nor the yuppie understand at all. To invest or not to invest. FOMO. You are scared.
During the last few years there were so many Blockchain conferences, that looked exactly like an Internet presentation from the 90’s. I managed to visit some of them and speak to the experienced presenters (why the odd feeling that some of them were visionaries for ‘The Groundbreaking VR/AR Technology’ five years ago and the ‘Miracles of the Social Media’ another five before that), who tend to obfuscate the technology with unnecessary terminology; Academics whose thoughts are particularly difficult to be followed or nicely dressed ordinary business people providing their panglossian view on ‘The Blockchain’ while leaving the utterly terrible feeling that they do not really understand what the heck they are talking about.
I’m also meeting other people during these blockchain conferences. People who lost money trading crypto, disillusioned VC’s, who will never-ever-again invest in another blockchain project, technology entrepreneurs who are both fascinated and troubled by the whole concept, legal experts who have no idea of what ‘a smart contract’ is and how the computers will affect law.
Some of them feel like they went down the blockchain rabbit hole and I believe that the outstanding book ‘The Basics of Bitcoins and Blockchains’ by Antony Lewis is for them.
If I was able to finish the review in August 2018 (when the author gave me access to the book), you would see in my highlights a prediction for something we know now as the longest bear market in history of the cryptocurrencies. N.B. Make sure you follow me on Medium - the more followers, the more often I will write stuff that saves you money and time.
So What Is Exceptional with This Book?
The Concept of Physical and Digital Money
Repeat after me. Blockchain is fundamentally an accounting technology. Accounting is fundamentally about money. Money is fundamentally about… but how do we define money? Instead of jumping into the technicalities of the blockchain technology, the author went back to the roots and the academic definition of money, defining its three major functions (as a medium of exchange, a store of value, and a unit of account).
What really fascinated me in the first part was the brief history of money (from the ancient times to present days). Rarely you could find such a comprehensive and useful guide using very simple language. The parts about the central banking, the birth of the US Federal Reserve System and the Gold Standards are written in an extremely understandable manner.
Do You Happen to Know How Banks Actually Work?
Being part of the INDUSTRIA team (and before that) I spent many years of my professional life in modernising the IT of the banking and financial sector, but I’ve never been portrayed better (a quote from the book):
“It is worth understanding how digital money is currently used to settle debts. In my career, I have spent time with people with a wide range of experience, from new graduates through to seasoned professionals who wear ties and work in banks and management consultancies, yet I rarely come across people who really understand how a payment is made, and who can articulate clearly how money moves around the financial system.”
Everyone working in the finance sector definitely needs to read this part of the book. There might be a thing or two to be learned and this is thefundamental heart of digital money and why blockchain technology was invented.
Cryptography, Blockchain, Hard Forks, Soft Forks
Blockchain technology and its ecosystem are getting very complex and different solutions tend to vary differently. Often this gets confusing and leads to fantastic statements like ‘The blockchain will solve the problem of trust’ or ‘X ways Blockchain Is Revolutionizing Y’. Within the technical sections of the book Antony Lewis provides common understanding of the most fundamental ideas, so that the readers can build on these and have intelligent and informed conversations about the application of these technologies to their specific domains.
At the end you will realise that there is no such thing as ‘the blockchain’, just as there is no such thing as ‘the database’ or ‘the network’. The blockchain is a combination of many distributed technologies and each has its different nuances depending on the specific use-case.
“If everybody minded their own business,” the Duchess said, in a hoarse growl, “the world would go round a deal faster than it does.”
Yes, blockchain is likely to be a foundational technology. It will take years — perhaps even decades for it to be fully developed, standardised and embedded in the architecture of the Internet and the financial system. My advise to you is to stay away from people who only repeat pseudo-profound comments that blockchains are kind of magic and get a good read. ‘The Basics of Bitcoins and Blockchains’ will help you not to be sucked in the blockchain rabbit hole.
N.B. Special thanks to Martin Jee, who is the principal consultant and director of the blockchain development recruitment agency Oxenbury Partners for helping me edit this article. Martin is also the beating heart of Corda Code Club, the best place to meet Corda DLT enthusiasts in the City.